Societe Generale Predicts S&P 500 to Rally Another 4.6% as Profit Growth Thrives
In a bold move, Societe Generale has raised their S&P 500 target to a street-high of 5,500, predicting a 4.6% rally for the benchmark index by the end of the year. This optimistic outlook is driven by the exceptional profit growth seen in large-cap stocks, fueled by what the bank calls “US exceptionalism.”
According to strategist Manish Kabra, the unique drivers of the US stock market have been propelling profits in large-cap stocks, setting new records for the S&P 500. Three macroeconomic themes are supporting this trend: the reshoring boom, the AI boom, and improvements in US financials.
Despite the widespread market optimism, Societe Generale views this rally as rational, given the continuous increase in profit growth. Kabra emphasized that the 4.6% upside potential does not mean that the market will see the same golden returns as earlier in the year, as the S&P 500 has already rallied about 8% in 2024.
Looking ahead, the biggest downside risk to the market is the possibility of the Fed hiking rates again. However, Societe Generale expects the central bank to cut rates three times this year, in line with the Fed’s messaging.
On the other hand, the upside risk is a potential bubble formation. Kabra noted that for the S&P 500 to exhibit dot-com-bubble exuberance, it would need to rise an additional 20%.
Overall, Societe Generale’s bullish forecast for the S&P 500 reflects their confidence in the US market’s ability to sustain profit growth and drive further gains for investors.
